Rapid Shift

Renewable energy bids in Colorado for Xcel Energy

Citizens’ input/Letter to Editor of Denver Post: Renewable Electricity Now: Good for the Environment, Good for the Ratepayers

It is now clear that the costs of wind, solar and battery storage have recently dropped dramatically, and adding large amounts of these clean technologies to our electric grid can reduce costs to ratepayers.1Yet Xcel Energy has declined to perform a study on how to eliminate our reliance on fossil fuels for power generation entirely by 2030 and replace them with Colorado’s abundant renewable resources.

In January 2017, Michael O’Boyle asserted in a “Greentech Media” article that utility-scale wind energy costs had dropped so precipitously that in some areas of the country, it was cheaper to build new wind turbines than to continue operating existing coal plants. O’Boyle further stated that costs for utility-scale solar weren’t far behind.2

In December, Xcel Energy reported on bids for wind and solar power purchase agreements (PPAs) from third party firms that appear to have substantiated O’Boyle’s claims. The median bid received for wind power was 1.8 cents per kilowatt-hour (kWh); the median bid received for solar power was 2.9 cents per kWh.1,3 O’Boyle’s conclusions were based upon significantly higher wind and solar prices than these median bids. Additionally, Xcel found that adding battery storage to back up these technologies when the wind isn’t blowing and the sun isn’t shining would contribute less than a penny to the bid amounts.

The Platte River Power Authority (PRPA), which provides wholesale power to four Front Range communities, received wind and solar PPA bids last December as well. It hasn’t made its bids publicly available, but has stated that purchasing wind would allow it to lower its rates by between 2.4% and 5.1% by 2030.4,5 Since most of the power generated by the PRPA comes from coal-fired plants built in 1984 or earlier, this suggests that power from new wind turbines here in Colorado is actually cheaper than power from coal plants that have already been amortized.

The PRPA is moving forward with purchasing 150 Megawatts of wind, increasing renewable energy to 48% of its portfolio by 2021.5 And Xcel has proposed moving toward providing 55% renewable electricity to its Colorado customers by 2026, thereby lowering its greenhouse gas emissions by 60% compared to 2005 levels.6

While these are both very positive developments, they’re not sufficient for Colorado to contribute its part to limiting the global average temperature rise to 1.5° – 2.0° C above the mid-19th Century average. This is what’s needed to avoid the worst impacts of climate change. Therefore, the PRPA is studying how it could achieve “Zero Net Carbon” electricity by 2030.7

The first phase of this study, which was released last month, paradoxically relies on the continued use of gas-fired electricity after 2030. However, we believe that planned future iterations of the PRPA’s study will likely demonstrate the feasibility of achieving 100% renewable, carbon-free, low-cost electricity by 2030 without relying on fossil fuel.

The Colorado Coalition for a Livable Climate (CCLC) circulated a petition last fall calling on Xcel Energy to follow the PRPA’s lead. Over 3,500 Coloradans signed that petition asking – among other things – that Xcel complete a study by the end of 2018 on how to achieve 100% renewable electricity on its Colorado grid by 2030.

Unfortunately, the President of Xcel Energy-Colorado has not responded positively to this request. In a letter dated December 22nd, 2017, he declined to commit to such a study, citing – rather absurdly – the need for more time to evaluate the wind and solar PPA bids received earlier that month.8

The PRPA has demonstrated that it is possible to complete a study on how to achieve carbon-free electricity by the end of the next decade. Xcel Energy should follow the PRPA’s example and begin the study we’ve requested now. Doing so would provide a potential path forward to reducing costs to ratepayers – to say nothing of contributing to the preservation of a livable climate for future generations.

8 Communication from David Eves of Xcel Energy to Micah Parkin of the CCLC, dated 12/22/17. Attached.

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By David Roberts, on Vox.com, Jan 2018

This month, energy nerds are very excited about a utility bid solicitation. Wait, hear me out. It really is exciting!

Usually, when we talk about how renewable energy will evolve in the next five years, we rely on analysts and projections. This is different.

When a utility puts out a request for proposals (RFP) — asking developers to bid in for the chance to build new energy resources — the developers who respond aren’t guessing, or boasting. They are laying down a marker that might get called. They are promising only what they are confident they can deliver.

That makes the responses to an RFP a clear snapshot of the state of the industry, relatively unembellished by ideology or public relations spin. This particular snapshot reveals that, on the ground, renewable energy costs are falling faster than even the most optimistic analyst had projected. (Let’s face it: In most areas of life, when you look past the hype at the real numbers, it’s depressing. Renewable energy is one area where that typical dynamic is diverted. The closer you look, the better the news gets!)

Colorado’s biggest utility seeks lots of new renewables

First, a brief bit of backstory. The utility in question is Xcel Energy, Colorado’s biggest, which serves 3.3 million electricity customers in the upper Midwest, Colorado, and New Mexico.

In 2016, Xcel released its Colorado Energy Proposal, which was news in itself. The utility proposed to shut down two coal plants in the state and replace their output with roughly 700 MW of solar, 1 GW of wind, and 700 MW of natural gas by 2023. That would put Xcel’s Colorado energy mix at roughly 55 percent renewables. (Xcel’s reasons for ramping up renewable energy are complex — part price, part taking advantage of federal tax credits, part public sentiment.)

Based on that plan, in 2017 the Xcel subsidiary Public Service Company of Colorado issued an “all-source solicitation,” which amounts to the utility saying to private developers: “Here’s how much new power by 2023 we need. Whatcha got?”

At the very tail end of last year, while everyone was busy with the holidays, the company quietly issued a report on the results. They were mind-blowing. An unprecedented number of developers came forward, eager to build renewable energy and eager to couple it with energy storage, all at unprecedented prices. It seems the people building this stuff are more confident than the analysts writing reports on it.

In Colorado, new renewables are cheap as hell, even with storage

Here’s a high-level overview of the bids and projects received in response to the RFP:

Xcel says that its 2013 all-source solicitation yielded 55 bids. The 2017 equivalent received 430 individual bids, for 238 separate projects. (Sometimes developers bid multiple times on a single project, with different combinations of financing, timeline, etc.)

A total of 350 of the bids involve renewable energy (134 for solar alone), representing more than 100 GW of capacity. Developers are chomping at the bit to build this stuff — partly to claim expiring federal tax credits, partly to claim market share in a booming sector, and partly just because they are human beings and excited about clean energy.

Second, the storage!

The big knock against wind and solar power is that they are variable — they come and go with the weather; they are not “dispatchable.” Critics say their low prices are misleading, because they must be backed up by “firm” capacity that can be turned on and off at will.

One way to make wind and solar more firm (ahem) is to attach storage, which can store excess production during the day when it’s cheap and sell it into the system at night when it’s more valuable. Storage extends the amount of time a renewable energy project is able to operate (its “capacity factor,” in the jargon).

The problem is that adding storage adds considerable cost. But the Xcel bids show that is changing.

The median bid for a wind project was $18.10/MWh; the median for wind+storage was $21, just three dollars higher. The median bid for a solar PV project was $29.50/MWh; the median bid for solar+storage was $36, just seven dollars higher. (Keep in mind what median means: Half the projects bid cheaper than this.)

According to Carbon Tracker, based on these bids, new wind+storage energy in Colorado is cheaper than energy from the state’s existing coal plants; solar+storage energy is cheaper than 75 percent of the state’s coal energy. This is worth repeating, because it’s a significant milestone: In Colorado, getting energy from new renewable energy projects with storage is cheaper than getting it from existing coal plants. Coal is dead.

For the Tucson project, storage added about $15/MWh to the cost of the solar. Compare that to the $3 to $7 added by storage in the Xcel bids. Storage prices are plunging, and as they do, renewables become more competitive.

The financial advisory firm Lazard issues a much-watched analysis each year of the “levelized cost of energy (LCOE),” a measure that purports to directly compare energy sources based on total costs. Its 2017 analysis estimated that solar+batteries has an LCOE of $82/MWh. You might notice that the median Xcel bid for solar+storage is less than half that. (Important caveats: The Lazard LCOE is for solar with 10 hours of storage, but we do not yet know how much storage is involved in the Xcel bids; Lazard estimates unsubsidized costs, while Xcel projects will benefit from federal tax credits; Lazard’s estimate is for 2017, while developers are effectively bidding 2023 costs. Direct comparisons are difficult. Point is, the number is vaulting down.)

Renewables just keep outpacing expectations

Colorado has excellent solar and wind resources, but it isn’t the only place where real-world bids are racing ahead of official estimates like Lazard’s. Saudi Arabia recently saw bids for utility-scale solar at under $20/MWh, which is less than half Lazard’s lowest estimate for the range of solar LCOE ($46/MWh).

At an auction in Chile last year, a solar+storage project won at $34.40/MWh, which is a third lower than the lowest Lazard LCOE estimates for solar alone.

A company called ViZn Energy Systems, which uses flow batteries rather than lithium-ion, is promising $27/MWh solar+storage by 2023, when the Xcel projects are scheduled to be online. By comparison, Bloomberg New Energy Finance projects an average LCOE of a little higher than that for solar alone in 2030.

What broad averages like LCOE can obscure is that the value of renewable energy (and storage) varies widely from place to place and market to market. In places with competitive procurement of energy (still a minority of energy markets in the world) and good renewable resources, renewables are crushing fossil fuels, even natural gas. Every market like that is a leading wedge, allowing the industry to scale up faster and drive down costs in other markets. This drives a self-reinforcing cycle that analysts looking at averages miss.

That helps explain why reports that focus on real-world projects (“bottom up” reports) tend to be so bullish on renewables. For instance, the latest report on renewable energy costs from the International Renewable Energy Agency (IRENA), drawing on 15,000 data points from projects around the globe, concludes that by 2020, “all the renewable power generation technologies that are now in commercial use are expected to fall within the fossil fuel-fired cost range.” That’s only two years away!

The Xcel RFP in Colorado is a relatively small signal, but it is one of many sending the same message: renewable energy is not “alternative” any more. Costs are dropping so fast it’s difficult to keep track. It is the cheapest power available in more and more places, and by the time children born today enter college, it is likely to be the cheapest everywhere. That’s a different world.

From Utility Dive:

An Xcel Energy resource solicitation received more than 400 individual proposals, the utility reported last month, including what may be record-low prices for renewable energy paired with energy storage.

The median price bid for wind-plus-storage projects in Xcel’s all-source solicitation was $21/MWh, GTM Research’s Shayle Kann noted on Twitter, and the median bid for solar-plus storage was $36/MWh. Previously, the lowest known bid for similar solar resources was $45/MWh in Arizona.

The utility detailed the bid information in its 30-day status report for the solicitation, dated Dec. 28. Bids are beng evaluated and a first round of projects will be selected next month.

Xcel Energy’s latest resource solicitation returned renewable energy and storage bids so competitive they have the sector abuzz on social media. While Kann noted details about battery duration and sizing were not made available, the price of battery-paired solar in the solicitation is a full $9/MWh cheaper than the cheapest contract announced just last year.

So much to talk about in the @XcelEnergyCO all-source solicitation, but let’s focus on this: The *median* bid price for wind+storage was $21/MWh, and for solar+storage was $36/MWh. Lowest known solar+storage price to date is $45/MWh in AZ. pic.twitter.com/bVGWd01XLc

In the Arizona case, storage added $15/MWh to the PPA price. Here the combo bids are $3-$7/MWh higher than standalone wind and solar. Lots of caveats (online by 2023, don’t know the storage duration, etc.), but incredible nonetheless.

In its status report, Xcel told state regulators that “the response to this solicitation is unprecedented.” The utility received 430 total individual proposals including 238 total projects. More than 350 of the individual proposals are renewable energy proposals or renewable energy with storage proposals, according to the report.

For comparison, Xcel said it received 55 bids in its 2013 all-source solicitation.

Many developers provided multiple bids for a single project resulting in significantly more bids than projects, Xcel noted. Differing bid information, such as different proposed in-service dates, different power purchase
agreements terms, and different ownership structures can result in multiple bids from a single proposed
project.

Of the 238 projects proposed, 99 projects included some level of utility ownership.

Importantly, Kann noted the addition of storage did not appear to raise bid prices as much as in the past. Wind energy with battery storage was bid at $21/MWh, just $3 higher than wind-only. In the Arizona deal last year, the addition of storage added about $15/MWh to the power purchase agreement bid.

Before the Arizona deal, the previous cheapest solar-plus-storage project was $0.11/kWh, set last July for a PPA between the Kauai Island Utility Cooperative and AES Corp. for a project that combined a 28 MW solar array with a 20 MW, 100 MWh battery system.